URGENT!! Hello, please help me with this question I really need help. Thank you so much! Suppose Hong Kong's money supply data as at 31 Dec 2016 and 31 Dec 2017 were as follows:31 Dec 2017($ billion)10730Total legal tender issuedLegal tender held by all deposit-taking institutionsDemand depositsDeposits with licensed banksNegotiable certificates of deposit (NCDs) issued by licensed banksand held by the publicDeposits with restricted licence banks (RLBS) and deposit-takingcompanies (DTCs)NCDs issued by RLBs and DTCsNCDs issued by RLBS and DTCS and held by the public31 Dec 2016($ billion)10025200600150180-1912040201606151P18212042ad eldsteha. Calculate the changes in the monetary base and the money supply M1 from 31 Dec 2016 to31 Dec 2017, respectively.b. On a certain day, some customers withdrew $30 billion from their savings deposits. Theyused $10 billion to buy NCDs from restricted licence banks, deposited $15 billion into theirtime deposit accounts with licensed banks and held the remaining $5 billion in cash. Howdid the above transactions affect money supply M1, M2 and M3, respectively?

Answered: Suppose Hong Kong's money supply data…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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URGENT!! Hello, please help me with this question I really need help. Thank you so much!

Suppose Hong Kong's money supply data as at 31 Dec 2016 and 31 Dec 2017 were as follows:
31 Dec 2017
($ billion)
107
30
Total legal tender issued
Legal tender held by all deposit-taking institutions
Demand deposits
Deposits with licensed banks
Negotiable certificates of deposit (NCDs) issued by licensed banks
and held by the public
Deposits with restricted licence banks (RLBS) and deposit-taking
companies (DTCs)
NCDs issued by RLBs and DTCs
NCDs issued by RLBS and DTCS and held by the public
31 Dec 2016
($ billion)
100
25
200
600
150
180-19
120
40
201
606
151
P182
120
42
ad elds
teha. Calculate the changes in the monetary base and the money supply M1 from 31 Dec 2016 to
31 Dec 2017, respectively.
b. On a certain day, some customers withdrew $30 billion from their savings deposits. They
used $10 billion to buy NCDs from restricted licence banks, deposited $15 billion into their
time deposit accounts with licensed banks and held the remaining $5 billion in cash. How
did the above transactions affect money supply M1, M2 and M3, respectively?

Expert Solution

Step 1: Define M1, M2, M3:

M1: Includes cash (coins, paper money) and demand deposits (checking accounts) - the most liquid assets.

M2: Includes M1 plus savings accounts, time deposits, and money market funds - broader and slightly less liquid assets.

M3: Includes M2 plus large time deposits, institutional money market funds, and other large liquid assets - the broadest and least liquid measure of the money supply.

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